Etsy, the popular e-commerce platform known for its handmade items and connection to local artisans, has announced that it will be laying off approximately 11% of its workforce. This decision comes at a crucial time during the holiday season and is an effort for the company to restructure its business and reduce costs in the face of a challenging macro and competitive environment. This article will analyze the implications of this restructuring and the potential impact it may have on Etsy’s future.
Challenging Macro and Competitive Environment
Etsy’s CEO, Josh Silverman, explained in a letter to employees that the company is operating in a “very challenging” macro and competitive environment. Despite the marketplace doubling in size since 2019, gross merchandise sales have remained essentially flat since 2021. This stagnation in sales is a cause for concern, as increasing sales is crucial for the success of Etsy’s sellers. Additionally, employee expenses have continued to grow, making their current trajectory unsustainable. These challenges have necessitated the need for major changes within the company.
To address these challenges, Etsy has decided to undergo a restructuring process. This restructuring aims to achieve meaningful operational efficiencies and cost savings. By reducing the size of its workforce, Etsy hopes to streamline its operations and align its expenses with its current financial realities. Approximately 225 employees, accounting for 11% of the workforce, will be let go as part of this restructuring. The majority of the costs associated with these layoffs will be allocated towards severance payments, employee benefits, and other related expenses.
In conjunction with the announcement of the workforce layoffs, Etsy also provided updated fourth-quarter guidance. The company now expects gross merchandise sales to decline between 1% and 2% compared to the same period last year. However, revenue is anticipated to increase between 2% and 3%. Despite these challenges, Etsy aims to achieve an adjusted EBITDA margin of between 27% and 28%. These adjusted figures reflect Etsy’s efforts to optimize its financial performance amidst a challenging business environment.
As part of the restructuring process, Etsy will undergo internal leadership changes. The Chief Marketing Officer, Ryan Scott, will be leaving the company, and their role will be consolidated under the Chief Operating Officer, Raina Moskowitz. This consolidation aims to enhance efficiency and promote closer collaboration within the leadership team. Additionally, the Chief Human Resources Officer, Kimaria Seymour, will be departing, and their position will be assumed by Toni Thompson, the current Vice President of Global People and Talent Strategy. These leadership changes reflect Etsy’s commitment to aligning its internal structure with its revised business objectives.
One concern surrounding these workforce layoffs is the timing during the holiday season. Many employees rely on their income to purchase gifts for their loved ones. Despite the layoffs, Etsy has assured affected staff that they will be paid through at least January 2nd. Employees will also receive severance packages based on their tenure and additional benefits such as extended COBRA health insurance.
Etsy’s decision to lay off a significant portion of its workforce is a strategic move aimed at restructuring the business and reducing costs. The company recognizes the challenges posed by a competitive market and relatively stagnant sales growth. Through this restructuring, Etsy seeks to achieve operational efficiencies and align its expenses with its current financial performance. While the layoffs may have an immediate impact on affected employees, Etsy has taken steps to provide support and benefits during this transitional period. As the company navigates these changes, it remains to be seen how this restructuring will ultimately influence Etsy’s long-term growth and success in the e-commerce industry.